Consumers driving demand for Macs at work

E-mail on iPhones
Apple's current approach of letting workers lead the charge into the workplace isn't a bad one. The market for PCs sold to businesses was $150 billion last year, and Apple held a measly 2.19 percent of that, according to market research firm IDC. For every percentage point that the $24 billion company picks up, it gains $1.5 billion in sales on top of its existing growth. Not bad for a company that's not really trying. And the bottom line would benefit as well. If Apple were to gain one point of share in the corporate market this year, that could boost expected earnings for fiscal 2008 by 11.5 percent, to more than $5 billion.

The iPhone may be Jobs' entrée into corporate offices. It's the one product for which Apple has created an explicit plan for reaching corporations. And it plans to deliver a software upgrade in June that will let the iPhone work with popular corporate e-mail systems such as Microsoft Exchange and allow customers to create their own customized iPhone programs, say, for checking inventory or logging expenses. Apple says more than 160 major corporations are testing the software.

Gartner Group analyst Ken Dulaney says all the discussion of iPhones is causing tech buyers to ponder whether to bring in Macs as well. At the least, more Macs will be appearing in some companies' research and development labs. That's because the software required to create iPhone applications runs only on Macs. "The iPhone is creating enough interest that people are starting to talk about whether Macs ought to be permitted, both here at Gartner and with our clients," says Dulaney.

Apple is getting help from an unlikely rival: Microsoft. Vista, the latest version of the software giant's Windows operating system, looks like it could turn out to be one of the great missteps in tech history. Not only does it lack compelling new features, but analysts say Vista requires companies to buy more expensive PCs, incur hefty training costs, and to deal with maddening glitches. About 90 percent of office workers still use its previous operating system, XP. "Microsoft has let this happen," says David B. Yoffie, a Harvard Business School professor and Intel board member. "They've created a huge opening for Apple."

(Msnbc.com is a joint venture of Microsoft and NBC Universal.)

Obsolete rivalry?
Corporate customers are in open revolt. Microsoft plans to stop PC makers from shipping machines with XP on June 30, but there has been an outcry from customers who don't want to switch to the troubled Vista. "We are being forced to upgrade," says the CIO at one Midwest manufacturer, who could not speak for attribution because of his company's press policies. "There is no business reason to upgrade." Dell has worked out an alternative whereby customers can still get XP, but only if they pay full fare for Vista and then "downgrade" to its less problematic predecessor.

Microsoft CEO Steve Ballmer concedes Vista is still a "work in progress," but he adds that many companies are happy with the new operating system. Mike Nash, corporate vice-president for Windows product marketing, says companies often take years to move to a new operating system and sales are right on track, with more than 140 million copies of Vista sold so far. As for complaints about the software, Nash says Microsoft has an opportunity in getting people to give it a try. "The thing that can best help perceptions is more and more people using Vista," says Nash.

More from BusinessWeek Why Macs Make Sense in the Corporate Market Apple Takes on Techdom Apple Among the World’s Most Innovative Companies

Microsoft argues that it is highly doubtful Apple will make substantial progress with corporations. Nash points out there's tremendous expense in building a corporate sales and support staff, and Apple's secretive culture would probably hamper the communications necessary to develop strong relationships with corporate tech buyers. What's more, Apple isn't likely to modify product designs to satisfy the numerous, often conflicting, requests from corporate clients. "There's a high level of conservatism [among corporate tech buyers]," says Nash. "Their job is to not be paged."

Microsoft is already hard at work on its next operating system, Windows 7. While details are scant, experts think it might be late 2010 or 2011 before it's on the market. And that's assuming there won't be any major distractions if Microsoft wins its fight to buy Internet giant Yahoo! Certainly, Apple's ad team seems to smell blood. Most of the company's "I'm a Mac" ads are aimed at taking Vista's rep even lower, including one in which a yoga instructor gets stressed out about how Vista screwed up her billing system.

By the start of the next decade, the competition between Windows and Mac may be far less relevant. Gartner analyst Michael Silver points out that many companies are shifting from old-style software programs that run on a particular type of computer to software services doled out over the Web. And many departments may be able to do without Windows-specific applications sooner, since day-to-day programs such as word processing and sales management are moving to the Web first. "This is the new world — the Internet has replaced Windows as the platform," says Marc Benioff, chief executive of Salesforce.com, a Microsoft rival and a pioneer in software delivered over the Net. "Now we are free to choose the best technology for the job."

MORE FROM BUSINESSWEEK

BusinessWeek Section Front

The Six Unknowns That Are Roiling the Stock Market Banks: Beyond the Citi Carnage Focus Stock: Favorable Readings for Itron Engineering: Suddenly Sexy for College Grads The End of Instant Messaging [As We Know It] Movers: Wal-Mart, Intel, NetApp, Citigroup Wall Street's Wild Gyrations VMware's Lofty Cloud Computing Goals Hughes Communications: Boondocks Broadband Unemployment: How to Slow the Bleeding BusinessWeek Section Front